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The eBay, PayPal, and Google Fight Club

The eBay, PayPal, and Google rivalry heated up in recent weeks. Google Checkout launched on June 29 after nearly a year of much anticipation, speculation and secrecy. Yet in the week since its launch, Google Checkout has come up against a huge obstacle from one of its biggest AdWords customers: eBay. EBay has banned Google Checkout as an accepted payment service for its sellers.

EBay’s own payment service is PayPal, recently acquired in the last year at the expense of eBay’s own payment service, Billpoint. eBay has likely feared the new Google payment service would rival PayPal. In fact, before the launch, speculators have said that the Google payment service would definitely give PayPal a run for its money, no pun intended. In fact, there were even many eBay sellers hoping this was indeed true. Sites such as PayPalSucks.com and other PayPal-hating sites were gleeful over the idea that another corporate giant wanted a piece of PayPal’s pie.

Nearly to the minute Google Checkout was launched, an eBay employee talked “smack” on the search engine giant’s payment service, still referring to Google Checkout as “GBuy,” as it was called before its launch. The post has since been deleted; but hey folks, this is the Internet! Haven’t you heard of cache? Obviously someone was able to dig up the cached post. Here’s a snippet:

“I find it amusing how the general media is claiming GBuy will be a significant competitor to PayPal based on GBuy having near zero buyers actually using the service vs over 100MM using PayPal. Let’s recall something here folks. In its current form, GBuy is a glorified merchant account… Merchants will always prefer to be the merchant of record by maintaining their own merchant account (vs having Google be the seller of record via GBuy). Without that community base, GBuy is simply Greenzap with a ‘better’ (more evil?) seller proposition…”

Since the launch of Google Checkout, Google has repeatedly explained that PayPal has nothing to fear from its service, and that its main focus is on the online merchant, not auction customers. Google Checkout is, according to Google, a safer and more convenient way to shop online.

If you buy three things from three different merchants, this means three different forms to fill out upon checkout, which means several minutes for each, and three different orders to track, and three different logins to keep track of. With Google Checkout, you only need to fill out the initial registration with Google, and that’s it.

Some of the benefits of the new service are:

The ability to keep all your online orders in one place.

An end to the need to fill out multiple forms for multiple stores; with Google Checkout you only need to fill out one form.

Web sites and merchants can integrate Google Checkout into their sites as an alternative payment processing method to existing checkout and credit card processing systems, said Salar Kamangar, vice president of product management at Google. Merchants using the system will be charged a processing fee of 20 cents per transaction, plus 2 percent of the relevant purchase price. Customers who pay for search-related keyword ads through Google AdWords will be able to process, free of charge, transactions that add up to 10 times the dollar amount of their AdWords spending, Kamangar said.

The eBay-PayPal team doesn’t believe a word Google says, however. EBay has updated their accepted Payments Policy to include Google Checkout as a payment service not permitted on eBay. While so far no explanation on eBay’s account has been offered as to why Google Checkout was added as a non-accepted payment service, the speculation is that eBay will offer a weak excuse that Google Checkout is a new, non-tested, and therefore fraud-susceptible payment service. However, with the ongoing tensions among the three giants, it’s clear to the rest of us that this is a further step in the eBay-PayPal monopoly distancing itself from Google.

UPDATE: According to Online Media Daily, Catherine England, a spokeswoman for eBay, said simply that the company won’t accept Google Checkout because the newly launched system is largely untested in the marketplace.

“One of those criteria for inclusion is having a proven track record for service, and we just don’t have that information yet with Google Checkout,” England said. She added that eBay might allow the service in the future.

But Google said the service had undergone thorough testing. “Billing and payments have historically been a core part of Google’s advertising programs and online services. Google Checkout is a natural extension of this history,” a spokeswoman for the search giant said in an e-mail. “We rigorously tested the service with external merchants before launching and have used this same service to process Google Video, Google Earth, Google Base, and Google Store transactions for months.”

The penalties on eBay for using a non-accepted service are severe, including listing cancellation, forfeiture of listing fees, limits on accounts, loss of PowerSeller status, and even account suspension. This is a big, virtual slap in the face for Google. Read it for yourself here on eBay’s Policy Page.

What’s interesting about this is that Google Checkout is a payment gateway, such as Authorize.net or LinkPoint, and credit cards are indeed permitted on eBay. So is this the first step in eBay flexing its Safe Harbor muscles in weeding out the alternative payments to PayPal, such as credit card payments, in general? Or is it more of a spiteful move on eBay’s part in order to show Google who’s really boss?

A blogger, Ty Tribble, made an interesting point on the PowerSellerKing blog. He talks about the hypocrisy in the Google Checkout-eBay Policy scenario. “It’s ironic they would do this here, and in the same breath go to Congress and fight the Net Neutrality battle. You can’t fight for an open Internet one day and then implement policies that close the walled garden the next.”

So who threw the first punch? With the introduction of eBay’s own ad system a few months ago, many speculated that eBay was attempting to rival Google’s AdWords system with the introduction of the contextual system in June. According to a Reuter’s report, eBay plans to provide hundreds of thousands of eBay auctioneers with simple snippets of code they can embed on other web sites that showcase items that are for sale on eBay’s site. The system scans the text of a web site for keywords and returns links to relevant eBay sales listings to the web page. As listings change on eBay, advertising dynamically changes on affiliated web sites to reflect the new products or services for sale on eBay.

Once the system is in place, however, it is not a stretch to predict that eBay will seek to further monetize its technology and network of partners by opening up the system to any advertiser and any web site, much like Google does with its AdSense.

Shakeup or Shakedown?

There also seems to be a flurry of activity over at PayPal, eBay, and Skype during this Google Checkout stand-off. Jeff Jordan, long-time president of PayPal, is leaving the company this fall, as stated in a press release from eBay last week, to be replaced by Skype’s president Rajiv Dutta.

Ina Steiner of AuctionBytes.com reports, “Dutta has been with eBay since 1998 and served as eBay’s Chief Financial Officer and head of strategy from 2001 through 2005. Alex Kazim, Skype Vice President of Products, will assume the role of President of Skype, reporting to Skype CEO and founder Niklas Zennstrom. Kazim, formerly Senior Vice President of new ventures at eBay, has held leadership positions in all of eBay’s businesses and was responsible for launching eBay’s international classifieds sites, Kijiji.

“PayPal’s Jeff Jordan, who joined eBay in 1999, was considered by many as a possible successor to eBay President and CEO Meg Whitman. Jordan led eBay North America from 2000 through 2004 and was named President of PayPal in December 2004.”

One has to wonder about the timing of the press release about the shakeup in light of the Google Checkout launch. And while we can speculate all we like, neither side is talking.

Will Google Retaliate?

So far, Google has not had much to say about being banned on eBay, or about the possible rivalry over eBay’s contextual ad system. But it doesn’t seem wise that Google retaliate in any way, as eBay is one of Google’s biggest AdWords customers. We should keep watch to see if any eBay ads on Google seem to drop for particular keywords, or if eBay ads disappear gradually, if at all.

But at this point, the ball is definitely in Google’s court, and it is up to Google to throw the next punch in order to continue the fight. However, since this latest move on eBay’s part simply looks bad for them, it may be exactly what Google had planned in the first place: make eBay look like a scared puppy, and let them make it worse on their own, and in turn, give Google Checkout the kind of publicity you just can’t pay for these days.